Global Tactical Asset Allocation (Faber) Backtest

Strategy summary

Global Tactical Asset Allocation (Faber), or GTAA, is a rules-based tactical allocation strategy that keeps five major asset-class ETF sleeves invested while they remain above their 10-month moving averages and routes weaker sleeves into short-term Treasuries for defense.

The five risk sleeves are:

• U.S. equities: SPDR S&P 500 ETF Trust (SPY)
• International developed equities: iShares MSCI EAFE ETF (EFA)
• Intermediate Treasuries: iShares 7-10 Year Treasury Bond ETF (IEF)
• REITs: Vanguard Real Estate ETF (VNQ)
• Commodities: Invesco DB Commodity Index Tracking Fund (DBC)

Each sleeve carries a fixed 20% budget. At each month-end, the strategy checks whether that sleeve is above or below its own 10-month simple moving average.

If a sleeve is above its trend filter, the strategy holds the risk asset. If it is below, that sleeve rotates into the iShares 1-3 Year Treasury Bond ETF (SHY) as the defensive allocation. The portfolio then rebalances at the same month-end close to reflect the updated sleeve states.

The design goal is straightforward: reduce major portfolio drawdowns and volatility while preserving diversified participation across major risk assets. This is a long-only, rules-based system. It does not use leverage, shorting, risk parity, relative-strength ranking, or discretionary overrides.

What this strategy is not

• Not a pure equity-timing model.
• Not a cross-sectional rotation strategy.
• Not a risk-parity, optimization, or changing-weight allocation model; each risk sleeve has a fixed 20% budget.
• Instead: a diversified tactical overlay designed to reduce drawdown and volatility across the same five-risk-asset opportunity set.

Report summary

Item	Value
Strategy	Global Tactical Asset Allocation (Faber)
Category	Tactical allocation / Trend following
Universe	SPY, EFA, IEF, VNQ, DBC, SHY
Trade Direction	Long-only allocation
Free Preview Window	2021–2025 (5 years); BTS uses the five most recent whole calendar years for free previews.
Full Backtest Period	2008–2025 (18 years); BTS uses the longest supported whole-calendar-year window available under the strategy universe, required instrument history, indicator warm-up, and methodology rules.
Window Start Rule	Headline reporting begins once required ETF history and 10-month SMA warm-up are available. Pre-window data establish live starting states; reported equity is rebased to $10,000 at the report-window start.
Starting Capital	$10,000
Primary Benchmark	Equal-weight five-risk-ETF portfolio, rebalanced monthly, with no timing overlay
Methodology Version	BTS-3377
Publication Date	May 3, 2026
Source / Credit	Mebane T. Faber, A Quantitative Approach to Tactical Asset Allocation

Benchmark summary

The primary benchmark is an equal-weight portfolio of the same five GTAA risk ETFs: SPY, EFA, IEF, VNQ, and DBC. Each sleeve is held at a fixed 20% target weight and rebalanced monthly. There is no timing rule and no defensive overlay.

This is the correct primary benchmark because it preserves the same underlying opportunity set while removing the strategy’s active timing and defensive-routing decision. Primary benchmark dividend accounting still follows the BTS headline benchmark total-return convention. In other words, the comparison answers the right question: what did the GTAA timing and defensive-routing overlay add, and what did it cost, relative to simply holding the same diversified basket continuously?

The benchmark also excludes SHY by design. SHY is part of the strategy’s defensive overlay. Putting it directly into the primary benchmark would blur the very mechanism the comparison is supposed to reveal.

For the benchmark-selection framework, see How to Choose the Right Benchmark.

• Primary benchmark: an equal-weight five-risk-ETF portfolio, rebalanced monthly, with no timing overlay.
• Preserves: the same five-ETF risk basket and monthly equal-weight architecture GTAA acts on.
• Removes: the GTAA timing rule and defensive-routing overlay.
• Excludes: SHY, because SHY is the strategy’s defensive allocation and belongs to the active overlay.

Key metrics: 2021–2025 free preview

• The free preview is a recent-window orientation tool, not the complete evidence set.
• A five-year free-preview window can be useful, but it can also overstate or understate the full historical tradeoff.
• The full report expands the scorecard across the complete report window and adds the path-level interpretation behind the headline numbers.

In this five-year free preview, GTAA had lower volatility, lower max drawdown, and higher Sharpe and Calmar ratios than the benchmark, while the benchmark had higher CAGR and ending capital. The full report is needed to evaluate whether that tradeoff holds across the complete backtest period.

	Metric	Strategy	Benchmark
Activity	Time in Market	100.0%	100.0%
Activity	Trades per Year	37.0	23.8
Activity	Win Rate	70.4%	94.8%
Risk	Volatility	7.0%	11.1%
Risk	Max Drawdown	-8.2%	-18.4%
Risk	Sharpe Ratio	0.9	0.7
Risk	Calmar Ratio	0.8	0.4
Result	CAGR	6.6%	8.1%
Result	Ending Capital	$13,773	$14,775

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